Page:United States Statutes at Large Volume 72 Part 1.djvu/1696

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PUBLIC LAW 86-866-SEPT. 2, 1968 "(2)

26 USC 172.

ADJUSTMENT OF NET OPERATING LOSS CARRYBACKS AND

CARRYOVERS OF SHAREHOLDERS.—For Durposes of determining, under section 172, the net operating loss carrybacks to taxable years beginning before January 1, 1958, from a taxable year of the shareholder for which he is allowed a deduction under subsection (b), such deduction shall be disregarded in determining the net operating loss for such taxable year. I n the case of a net operating loss tor a taxable year in which a shareholder is allowed a deduction under subsection (b), the determination of the portion of such loss whi-^h may be carried to subsequent years shall be made without regard to the preceding sentence and in accordance with section 172(b)(2), but the sum of the taxable incomes for taxable years beginning before January 1, 1958, shall be deemed not to exceed the amount of the net operating loss determined with the application of the preceding sentence. "SEC. 1375. SPECIAL RULES APPLICABLE TO DISTRIBUTIONS OF ELECTING SMALL BUSINESS CORPORATIONS. •'(a)

26 USC 316.

[72 S T A T.

CAPITAL GATNS.— "(1) TREATMENT I N HANDS OF SHAREHOLDERS.—The

amount includible in the gross income of a shareholder as dividends (including amounts treated as dividends under section 1373(b)) from an electing small business corporation during any taxable year of the corporation, to the extent that such amount is a distribution of property out of earnings and profits of the taxable year as specified in section 316(a)(2), shall be treated as a long-term capital gain to the extent of the shareholder's pro rata share of the excess of the corporation's net long-term capital gain over its net short-term capital loss for such taxable year. For purposes of this paragraph, such excess shall be deemed not to exceed the corporation's taxable income (computed as provided in section 1373(d)) for the taxable year, "(2)

DETERMINATION OF SHAREHOLDER'S PRO RATA SHARE.—A

shareholder's pro rata share of such excess for any taxable year shall be an amount which bears the same ratio to such excess as the amount of dividends described in paragraph (1) includible in the shareholder's gross income bears to the entire amount of dividends described in paragraph (1) includible in the gross income of all shareholders. "(b) DIVIDENDS RECEIVED CREDIT NOT ALLOWED.—The amount includible in the gross income of a shareholder as dividends from an electing small business corporation during any taxable year of the corporation (including any amount treated as a dividend under section 1373(b)) shall not be considered a dividend for purposes of 26 USC 34, 37, section 34, section 37, or section 116 to the extent that such amount ^^^' is a distribution of property out of earnings and profits of the taxable 26 USC 316. year as specified in section 316(a)(2). For purposes of this subsection, the earnings and profits of the taxable year shall be deemed not to exceed the corporation's taxable income (computed as provided in section 1373(d)) for the taxable year. "(c) TREATMENT OF FAMILY GROUPS.—Any dividend received by a shareholder from an electing small business corporation (including any amount treated as a dividend under section 1373(b)) may be apportioned or allocated by the Secretary or his delegate between or among shareholders of such corporation who are members of such 26 USC 704. shareholder's family (as defined m section 704(e)(3)), if he determines that such apportionment or allocation is necessary in order to reflect the \ alue of services rendered to the corporation by such shareholders.

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